Gold has given up much of yesterday’s modest gains and is marginally lower in all currencies except the Swiss franc. The euro has stabilized despite continuing contagion concerns and an existential threat to the euro currency itself.

Cross Currency Rates

Gold remains close to record nominal highs in all major currencies but media coverage in the UK, Ireland and Europe remains minimal and skeptical. Focus continues to be almost exclusively on bond, equity and currency markets – with little or no coverage of gold.

The ramifications of contagion and a euro currency crisis which would lead to the price of gold in euros surging has not been covered in the media. This is of course bullish as it shows a continuing lack of understanding and appreciation of gold’s importance as a diversification and a safe haven asset.

The rout in peripheral Eurozone bond markets, and the Greek market in particular, seen yesterday has abated somewhat with prices stabilizing in most markets. Portugal is the exception and its 10 year bond has risen to a new euro era record high of 11.124%.

World Gold Reserves, December 2010. Source Wikipedia via World Gold Council

Congressman Ron Paul, the Republican presidential candidate who is chairman of the U.S. House Financial Services subcommittee and chairs the House's Subcommittee on Domestic Monetary Policy plans to question U.S. Treasury officials next Thursday (June 23) about the U.S. gold reserves and get them to testify regarding the authenticity of the nation’s gold reserves.

This is an important question given the increasingly precarious state of the U.S.’ finances and is important to the gold market as the unaudited U.S. gold reserves are the largest holdings of gold bullion in the world (see table above).

Paul, who has said he thinks it's possible there is no gold at Fort Knox, recently said that the government is asking the American people to trust that all the gold is there, while not allowing site visits or an audit.

Paul has introduced legislation that would require an independent audit of the 5,000 plus tons of gold bullion that is believed to stored in the Fort Knox, Kentucky vault. The audit would include other U.S. gold reserves held in government facilities in Denver, West Point and the New York Federal Reserve Bank in lower Manhattan.

Paul is also calling for some of the bars to be assayed and tested by a laboratory in order to prove that it is investment grade gold bullion as the U.S. Treasury Department says. There have been unconfirmed reports that the Chinese received a shipment of large gold bullion bars from the U.S. that contained tungsten.

Last August Paul said that "if there was no question about the gold being there, you think they would be anxious to prove gold is there." He has been pressing the point since the early 1980s, when he was a member of the U.S. Gold Commission.

Gold Reserves Per Capita. Source World Gold Council

Paul’s recommendation back then was that Congress audit the gold reserves. It was rejected by 15 of the Gold Commission's 17 members.

Lack of transparency leads to corruption which is one of the reasons for our current crisis.

Given the growing risks posed to the US dollar as global reserve currency, an audit is important as it may allay the concerns of GATA (Gold Anti-Trust Action Committee) and their followers about whether US gold reserves have been sold or lent into the gold market thereby artificially suppressing the gold price.

An audit might help restore faith in the dollar which is being debased with the dollar now trading at less than a 1,500th of an ounce of gold.

The US dollar has lost 97% of its value in the last 97 years – since the foundation of the Federal Reserve (see most watched video in the world on gold bullion so far in 2011 - here). The debasement has accelerated since the U.S. came off the Gold Standard in 1971.

If Ron Paul’s reasonable requests lead to an audit that establishes that the U.S. gold reserves are substantially less than the over 8,100 tons that they are meant to be, the dollar will be at risk of falling the last 3% in a shorter time frame.